BSX marks 40 years of trading and growth
The Bermuda Stock Exchange (BSX) celebrated 40 years in business this year.
Set up in February 1971, today it has more than 800 securities listed, including more than 360 funds, with a combined market capitalisation of more than $225 billion.
Among the factors which have helped to shape the BSX have been its operational reliability, Bermuda’s unique service-based economy, its geographical proximity to the US, UK and European markets and the streamlined regulatory regime in which it operates.
It has also been able to tap into the success of the Island’s financial services and insurance industry which is home to more than 1,000 insurers with total assets of $96 billion and gross premiums of $120 billion, as well as providing approximately 40 percent of US and European Union broker-placed catastrophe covers, most recently through its Insurance Linked Securities catastrophe bond listings.
Maintaining itself at the fore of international standards of regulation and transparency, while meeting the needs of the local economy and remaining cost competitive with other offshore stock exchanges, the BSX has achieved a number of accolades, including becoming a full member of the World Federation of Exchanges, a “Recognised Stock Exchange” by the UK’s HM Revenue & Customs, a “Designated Offshore Securities Exchange” by the US Securities and Exchange Commission, and recognised as a ‘Designated Investment Exchange’ by the UK’s Financial Services Authority.
A report in
The Royal Gazette dated February 3, 1971, said that the BSX opened to a cautious reception with high asking prices and low bids, predicting that while there was interest in the market it would take “several weeks” before it settled down.
According to the report, the Exchange started life out of the Bank of Bermuda’s conference room, with a number of household names such as Argus Insurance, Butterfield Bank, Belco and Bermuda Fire & Marine among the first securities listed. Others have come and gone from the original 35, and today there are around 20 or so listed.
David Brown, chairman of the BSX, said: “Forty continuous years of service to the capital markets is an achievement in any jurisdiction and notable in one the size of Bermuda.
“Leading edge technology and niche market opportunities have placed the BSX on the international stage and further demonstrated Bermuda’s ability to innovate and deliver services to a sophisticated and demanding global marketplace.
“In the wake of the international economic crisis and in the absence of a Federal Reserve to buoy the market, the BSX has demonstrated its considerable strength and value to the core domestic capital market by clearly illustrating its regulatory and operational capabilities as the global financial crisis affected the local market.”
Former president and CEO of the BSX William Woods said that the same forces of globalisation behind several mooted mergers between large international stock exchanges formed the original vision for the transformation of the BSX as it evolved from a domestic marketplace for local stocks to a truly internationally recognised exchange.
He said that the BSX had kept pace with the rest of the world, introducing an electronic trading and dematerialised securities settlement in the mid-1990s, enabling traders to buy and sell shares and providing business owners with the ability to raise fresh capital through rights issues.
Mr Woods said that while enhancing Bermuda’s reputation as an international finance centre, the BSX had also helped to attract business to the Island, enabling companies domiciled here to list their securities on the Exchange, with 10 international insurance companies listed to date.
The BSX has also served as a leading example to other offshore centres to follow, with the Cayman Islands and the Channel Islands soon following suit, he said. Launched initially as an idea, the Bermuda Exchange, as it was known then, was devised by bankers Donald Lines and Richard Thatcher, who acting on behalf of their clients, saw the need to create liquidity in the local market and move away from the burdensome tender process used to buy and sell stock locally.
Having floated the concept to the four banks Bank of Bermuda, Butterfield Bank, Bermuda Provident Bank and Bermuda National Bank it soon became a reality with a representative from each bank sitting at the trading table and drawing numbered ping-pong balls out of a bag to establish their position for the day.
Each trader would state their offers using an open cry system and the remaining traders would then bid on the position, taking place every Monday afternoon and rotating between the banks.
By mid-1971, the total value of securities traded since February of that year was more than $500,000, and by the end of the year that figure had surpassed $1 million.
The BSX was incorporated in March 1993, with the management committee being replaced with a more formalised council and the appointment of current president and CEO Greg Wojciechowski as project manager two months later to oversee its day-to-day operations, ultimately taking on the full role in 2001.
“The development of the BSX has contributed directly to the growth and maturity of the domestic capital market, which is evidenced by over $1.5 billion being raised by listed companies in Bermuda from investors in the domestic capital market,” said Mr Wojciechowski.
He continued: “For nearly two decades I have had the distinct privilege of working with scores of people who shared the vision of the development of an exchange in Bermuda.
“Collectively we have grown and matured into a team of world-class stock exchange professionals.
“I believe we have established the rock solid foundation upon which a great exchange institution will continue to develop and serve investors far beyond the shores of Bermuda. The BSX will not only continue to do its part in driving the evolution of the domestic capital market for Bermudians and the country, but it will also provide the support for innovative global financial products.
“Regardless of how changes in global market structures play out, I know that the BSX will have a future role in the global exchange and capital market systems.
“I am confident that when I hand over the reins to the next generation of BSX management, the spirit of dedication, entrepreneurialism, old fashioned grit and hard work that has defined the organisation thus far will provide the impetus for even further growth, achievement and success.”